In announcing his resignation as Nortel’s CEO today, Mike Zafirovski brought an end to a reign that took the company under him from bad to worse, from severely compromised to having to submit to chronic palliative care and, finally, to corporate euthanasia.
Nortel now waits for its harvestable, marketable organs to be surgically removed so that its respirator can be switched off. Zafirovski doesn’t want to stick around for the company’s final labored breaths under bankruptcy protection. He’s off to find a new job as CEO somewhere else. His work at Nortel is done, as has been the work of so many Nortel employees euphemistically “let go” during what was a long goodbye.
In the statement announcing his resignation, Zafirovski (known affectionately and otherwise as Mike Z.) implicitly made the case that he was doomed from the start, condemned to lead a fatally damaged company amid a punishing economy on a halting march toward oblivion. Said the departing CEO:
“Although solid progress was made in many areas, at the end, the capital structure and legacy costs coupled with the economic downturn proved too difficult to surmount.”
The chairman of the Nortel board, Harry Pearce, also rushing breathlessly toward the exit, offered similar excuses in Zafirovski’s (and, by extension, his own) defense:
“Mike came to Nortel to transform the company. He made great progress on many fronts including addressing significant accounting and related legal issues; improving the quality of Nortel products and the company’s cost structure. His ambitious vision helped shift the economic center of the company from legacy to growth investments. It is unfortunate the transformation was derailed by the deteriorating economic climate and the company’s legacy cost structure. The operating improvements and strategic investments made during his tenure significantly contributed to the fact that Nortel’s businesses are so attractive to potential buyers today.”
But the fact is, many of those businesses would have been more attractive to buyers long before now. They are depreciating assets, and they have been in that category for some time.
If Zafirovski, his executive team, and the inept and out-of-touch Nortel board of directors had made hard choices earlier – about focusing their efforts, about where and how Nortel could best utilize its resources, about selling certain business units and keeping others – Nortel probably would have been able to reconstitute itself as a viable company. It would not have been as broad as the Nortel corporate hydra of recent years, but that very economy of focus would have given it a chance to survive.
When he took the job at Nortel back in 2005, Zafirovski presumably knew what he was getting into – after all, he’s a smart guy, as he’ll be the first to tell you – so why didn’t he focus the company on viable markets rather than keeping pieces – such as enterprise – that were doomed to fail?
Some of the many partnerships Nortel struck under Zafirovski were long on photo-opportunity showmanship and woefully short on business substance. An example was the unified-communications partnership Nortel struck with Microsoft. In the final analysis, that was a one-sided arrangement that gave Nortel a few high-profile press releases and little else besides.
Yes, the accounting scandals and economic hardship were tough challenges – and a lot of severe damage was done to Nortel by its previous leadership regimes, no question – but Zafirovski should not be excused from taking responsibility for what was done, and not done, under his watch at the company.
Meanwhile, Nortel announces further financial losses as customers defect, partnerships waver, and competitors pounce. These losses could indeed be worse, and that’s a testament to the residual quality of Nortel’s technologies and products.
As Zafirovski blithely waves goodbye, the disposition of Nortel’s assets continues unabated. As he told Reuters:
“Discussions are advancing. They’re promising and there’s a confidence that we should be able to get stalking-horse agreements for all parts of the business … before this quarter’s over.”
One can only wonder what might have been if Nortel had decided to sell, and keep, some of those businesses long before now.